Could someone who bought and stored grain claim payment from Kentucky's grain insurance fund?

Plain-English summary

In 1994, Kentucky's Attorney General concluded that people who purchased grain from a grain facility, stored it there, and used it as needed could not claim compensation from the Kentucky Grain Insurance Fund merely as buyers. Under the statutory definition quoted in the opinion, a "producer" had to be an owner, tenant, or operator of Kentucky land with an interest in proceeds from grain sales. A claimant first had to qualify as a producer. The buyers described in the request did not produce grain on their land, so the AG said they were ineligible for compensation or participation in the fund program.

The request also raised whether a scale ticket or other evidence of ownership and whether an assessment was collected on the grain would matter. The AG resolved the question at the producer-definition threshold: a purchaser who was not an owner, tenant, or operator of the land did not qualify as a producer in the first place.

Currency note

This opinion was issued in 1994. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Historical summary

Grain purchasers

The AG distinguished buying grain from producing it through an interest in Kentucky land. It said a person who was merely a purchaser, and not an owner, tenant, or operator of land, was outside the statutory producer definition. That person could not become a fund claimant under the law the AG analyzed.

Grain Board

The Board had received claims from people who bought grain at a facility and stored it there. The AG said producer status was a prerequisite to claimant status under KRS 251.610(2). It concluded that these purchasers were not entitled to compensation under KRS 251.670.

Landowners, tenants, and operators

The quoted producer definition required an interest in proceeds from a sale of grain produced on Kentucky land. It also had an exception concerning proof that grain was produced in Kentucky when a producer established payment of an assessment by clear and convincing evidence. The AG still read the owner, tenant, or operator requirement as the threshold the described purchasers failed.

Common questions

Did owning grain stored at a facility make a buyer a fund claimant?

The AG said no for buyers who were not owners, tenants, or operators of Kentucky land. It treated producer status, not possession of grain or evidence of ownership alone, as the first requirement.

Could a person who only bought grain receive fund compensation after a dealer or warehouse failure?

Not under the facts analyzed. The AG concluded that a mere purchaser was neither a producer nor an eligible claimant under the cited statutes.

Did paying or not paying the fund assessment decide these buyers' claims?

The request raised that issue, but the AG's answer rested on the buyers' failure to meet the producer definition. It said they were not eligible to participate in the program because they were not producers.

Background and statutory framework

The Department of Agriculture described a fund financed by an assessment on marketed grain and asked about claims from people who purchased grain rather than growing it. The AG quoted KRS 251.610(18)'s producer definition and read KRS 251.610(2) to require producer status before claimant status. It concluded that the described purchasers could not obtain compensation under KRS 251.670 or participate in the program established by KRS 251.640.

Citations and references

• KRS 251.610(18): definition of a grain producer.
• KRS 251.610(2): claimant status discussed in the opinion.
• KRS 251.640: assessment and fund program.
• KRS 251.670: compensation provision the AG found unavailable to these purchasers.

Source

• Landing page: https://www.ag.ky.gov/Resources/Opinions/Opinions/OAG94-031.htm

Original opinion text

OAG 94-31

May 2, 1994

Donna Greenwell Dutton

General Counsel, Department of Agriculture

7th Floor, 500 Mero Street

Frankfort, Kentucky 40601

Dear Ms. Dutton:

In your letter to this office dated April 14, 1994, you state as follows:

This is to request an attorney general's opinion pertaining to the Kentucky Grain Insurance Fund, KRS 251.600-251.740.

The Grain Insurance Fund was established in order to compensate grain producers in the event there is a financial failure of a grain dealer or grain warehousemen. The Fund is financed by the producers of grain who pay a one-half cent (1/2c) per bushel assessment on all marketed grain. A producer can receive a refund if he is dissatisfied with the assessment by demanding a refund in writing. Any producer who suffers a financial loss due to a failure of a grain dealer or warehouseman can make a claim for compensation to the Kentucky Grain Board, who determines the validity and the amount of the claim.

Recently, the Kentucky Grain Board was presented with several "claims" that they are uncertain on whether or not payment should be made. The key question is whether or not these persons are "claimants" and "producers" as defined in KRS 251.610 in order to be entitled for compensation pursuant to KRS 251.670.

Generally, claimants before the Grain Board are producers of grain who take grain produced on their land to a grain facility, sell the grain to the grain facility, and receive proceeds therefrom. In this instance, persons purchased grain from the grain facility, stored the grain at the facility, and used the grain on an as needed basis. These persons did not produce the grain on their land. Therefore, it is uncertain whether or not they are a "producer" as defined in KRS 251.610. If there persons are found to be producers, then the question becomes whether or not these persons are "claimants" as defined in KRS 251.610. These persons most likely hold some form of written evidence of ownership, such as a scale ticket, and therefore, would be qualified under KRS 251.610(2)(b).

The final question is whether or not these persons would be eligible to participate in the grain insurance fund program if the assessment had not been collected on the purchase of grain. Since these persons purchase grain instead of producing grain, they most likely did not pay into the Fund and the grain facility most likely did not take the one-half cent (1/2c) assessment on this grain.

KRS 251.610(18) defines "producer" as follows:

'Producer' or 'grain producer' means the owner, tenant or operator of land in Kentucky who has an interest in and receives all or any part of the proceeds from the sale of the grain produced on land in Kentucky, except that a producer who establishes by clear and convincing evidence that he has paid an assessment authorized by KRS 251.640 shall not be required to establish that the grain was produced in Kentucky.

To answer your question, we start with the premise that a court has the duty to construe statutes literally if it is reasonably possible to do so. ITT Commercial Finance Corp. v. Madisonville Recapping Co., Inc., Ky. App., 793 S.W.2d 849 (1990). In construing a statute the court should look to its letter and spirit, viewing it as a whole, and should also look to the circumstances under which it was enacted. City of Owensboro v. Noffsinger, Ky., 280 S.W.2d 517 (1955).

The obvious intent of the legislature was that the claimant first be an "owner, tenant or operator of land in Kentucky." In order to be a "claimant" the person must first be a "producer." KRS 251.610(2). He cannot be a producer unless he fits the definition as quoted above. If he is not the owner, tenant or operator of the land but is merely a purchaser, he is not a "producer" and therefore cannot be a "claimant." This individual is not entitled to compensation pursuant to KRS 251.670. These persons are not eligible to participate in the grain insurance program established by KRS 251.640 because they are not "producers" as statutorily defined.

Sincerely,

CHRIS GORMAN

ATTORNEY GENERAL

Joseph R. Johnson

Assistant Attorney General